SEMGROUP CORP, 10-K/A filed on 3/30/2012
Amended Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Jun. 30, 2011
Jan. 31, 2012
Class A
Jan. 31, 2012
Class B
Document Type
10-K 
 
 
 
Amendment Flag
false 
 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
Document Fiscal Year Focus
2011 
 
 
 
Entity Registrant Name
SemGroup Corp 
 
 
 
Entity Central Index Key
0001489136 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Entity Common Stock, Shares Outstanding
 
 
41,798,893 
162,361 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
Entity Public Float
 
$ 1,059,026,939 
 
 
Entity Current Reporting Status
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Consolidated Balance Sheets (USD $)
Dec. 31, 2011
Dec. 31, 2010
ASSETS
 
 
Equity method investments
$ 327,243,000 
$ 152,020,000 
LIABILITIES AND OWNERS' EQUITY
 
 
Current portion of long-term debt
26,058,000 
12,000 
Long-term debt
83,277,000 
348,431,000 
SemGroup Corporation owners' equity:
 
 
Common stock (Note 19)
418,194 
 
Total liabilities and owners' equity
1,491,181,000 
1,667,188,000 
Successor [Member]
 
 
ASSETS
 
 
Cash and cash equivalents
76,405,000 
90,159,000 
Restricted cash
39,543,000 
65,455,000 
Accounts receivable (net of allowance of $3,687 and $11,178 at December 31, 2011 and 2010, respectively)
212,479,000 
238,026,000 
Receivable from affiliates
6,408,000 
337,000 
Inventories
33,061,000 
129,846,000 
Other current assets
21,839,000 
39,268,000 
Total current assets
389,735,000 
563,091,000 
Property, plant and equipment (net of accumulated depreciation of $84,880 and $45,491 at December 31, 2011 and 2010, respectively)
743,235,000 
781,815,000 
Equity method investments
327,243,000 
152,020,000 
Goodwill
9,453,000 
107,823,000 
Other intangible assets (net of accumulated amortization of $4,336 and $6,677 at December 31, 2011 and 2010, respectively)
8,950,000 
32,264,000 
Other assets, net
12,565,000 
30,175,000 
Total assets
1,491,181,000 
1,667,188,000 
LIABILITIES AND OWNERS' EQUITY
 
 
Accounts payable
145,236,000 
153,528,000 
Payable to affiliates
6,871,000 
257,000 
Accrued liabilities
55,489,000 
63,355,000 
Payables to pre-petition creditors
37,800,000 
74,817,000 
Deferred revenue
23,031,000 
12,604,000 
Other current liabilities
2,026,000 
16,223,000 
Current portion of long-term debt
26,058,000 
12,000 
Total current liabilities
296,511,000 
320,796,000 
Liabilities subject to compromise
   
   
Long-term debt
83,277,000 
348,431,000 
Deferred income taxes
73,784,000 
85,139,000 
Other noncurrent liabilities
58,944,000 
57,754,000 
Commitments and contingencies (Note 18)
   
   
SemGroup Corporation owners' equity:
 
 
Common stock (Note 19)
418,000 
415,000 
Additional paid-in capital
1,032,365,000 
1,023,727,000 
Accumulated deficit
(167,812,000)
(170,189,000)
Accumulated other comprehensive income (loss)
(13,875,000)
1,115,000 
Total SemGroup Corporation owners' equity
851,096,000 
855,068,000 
Noncontrolling interests in consolidated subsidiaries
127,569,000 
 
Total owners' equity
978,665,000 
855,068,000 
Total liabilities and owners' equity
$ 1,491,181,000 
$ 1,667,188,000 
Consolidated Balance Sheets (Parenthetical) (Successor [Member], USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Successor [Member]
 
 
Accounts receivable, allowance for doubtful accounts
$ 3,687 
$ 11,178 
Property, plant and equipment, accumulated depreciation
84,880 
45,491 
Other intangible assets, accumulated amortization
$ 4,336 
$ 6,677 
Consolidated Statements Of Operations And Comprehensive Income (Loss) (USD $)
In Thousands, except Per Share data, unless otherwise specified
1 Months Ended 12 Months Ended 11 Months Ended
Dec. 31, 2009
Successor [Member]
Dec. 31, 2011
Successor [Member]
Dec. 31, 2010
Successor [Member]
Nov. 30, 2009
Predecessor [Member]
Revenues:
 
 
 
 
Product
$ 132,005 
$ 1,250,784 
$ 1,354,765 
$ 800,265 
Service
17,131 
124,129 
181,913 
99,134 
Other
8,192 
104,597 
93,656 
1,836 
Total revenues
157,328 
1,479,510 
1,630,334 
901,235 
Expenses:
 
 
 
 
Costs of products sold, exclusive of depreciation and amortization shown below
140,036 
1,154,175 
1,265,932 
744,173 
Operating
16,765 
157,013 
153,440 
47,307 
General and administrative
8,012 
77,015 
87,237 
44,248 
Depreciation and amortization
8,791 
51,189 
70,882 
38,974 
Loss on disposal or impairment of long-lived assets, net
23,119 
9,497 
105,050 
13,625 
Total expenses
196,723 
1,448,889 
1,682,541 
888,327 
Earnings from equity method investments
 
15,004 
1,949 
 
Operating income (loss)
(39,395)
45,625 
(50,258)
12,908 
Other expenses (income):
 
 
 
 
Interest expense (excluding compromised interest of $220,953 for the eleven months ended November 30, 2009)
7,169 
60,208 
86,133 
12,041 
Foreign currency transaction loss (gain)
(678)
(3,450)
2,899 
(3,950)
Other expense (income), net
(545)
(11,539)
1,439 
(4,742)
Total other expenses, net
5,946 
45,219 
90,471 
3,349 
Income (loss) from continuing operations before reorganization items and income taxes
(45,341)
406 
(140,729)
9,559 
Reorganization items gain
 
 
 
3,532,443 
Income (loss) from continuing operations before income taxes
(45,341)
406 
(140,729)
3,542,002 
Income tax expense (benefit)
(7,209)
(2,416)
(6,223)
6,310 
Income (loss) from continuing operations
(38,132)
2,822 
(134,506)
3,535,692 
Income (loss) from discontinued operations, net of income taxes
215 
(10)
2,434 
(141,613)
Net income (loss)
(37,917)
2,812 
(132,072)
3,394,079 
Less: net income (loss) attributable to noncontrolling interests
(25)
435 
225 
(505)
Net income (loss) attributable to SemGroup
(37,892)
2,377 
(132,297)
3,394,584 
Net income (loss)
(37,917)
2,812 
(132,072)
3,394,079 
Other comprehensive income (loss):
 
 
 
 
Currency translation adjustments
(4,180)
(13,075)
6,475 
28,109 
Other, net of income tax
846 
(1,915)
(2,026)
 
Total other comprehensive income (loss)
(3,334)
(14,990)
4,449 
28,109 
Comprehensive income (loss)
(41,251)
(12,178)
(127,623)
3,422,188 
Less: comprehensive income (loss) attributable to noncontrolling interests
(25)
435 
225 
(505)
Comprehensive income (loss) attributable to SemGroup
$ (41,226)
$ (12,613)
$ (127,848)
$ 3,422,693 
Net income (loss) per common share (Note 20):
 
 
 
 
Basic
$ (0.92)
$ 0.06 
$ (3.20)
 
Diluted
$ (0.92)
$ (0.06)
$ (3.20)
 
Consolidated Statements Of Operations And Comprehensive Income (Loss) (Parenthetical) (Predecessor [Member], USD $)
In Thousands, unless otherwise specified
11 Months Ended
Nov. 30, 2009
Predecessor [Member]
 
Compromised interest expense
$ 220,953 
Consolidated Statements Of Changes In Owners' Equity (Deficit) (USD $)
In Thousands
Rose Rock Midstream, L.P. [Member]
Noncontrolling Interests [Member]
Successor [Member]
Rose Rock Midstream, L.P. [Member]
Total Owners' Equity (Deficit) [Member]
Successor [Member]
Partners' Capital [Member]
Predecessor [Member]
Common Stock [Member]
Successor [Member]
Additional Paid-In Capital [Member]
Successor [Member]
Accumulated Deficit [Member]
Successor [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Successor [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Predecessor [Member]
Noncontrolling Interests [Member]
Successor [Member]
Noncontrolling Interests [Member]
Predecessor [Member]
Total Owners' Equity (Deficit) [Member]
Successor [Member]
Total Owners' Equity (Deficit) [Member]
Predecessor [Member]
Successor [Member]
Predecessor [Member]
Balance at Dec. 31, 2008
 
 
$ (3,382,622)
 
 
 
 
$ (40,071)
 
$ 2,212 
 
$ (3,420,481)
 
 
Net income (loss)
 
 
(214,616)
 
 
 
 
 
 
(201)
 
(214,817)
 
3,394,079 
Other comprehensive income (loss)
 
 
 
 
 
 
 
28,109 
 
 
 
28,109 
 
28,109 
Distributions
 
 
 
 
 
 
 
 
 
(86)
 
(86)
 
 
Balances prior to implementation of Plan of Reorganization
 
 
(3,597,238)
 
 
 
 
(11,962)
 
1,925 
 
(3,607,275)
 
 
Cancellation of Predecessor equity, extinguishment of debt, and fresh-start reporting
 
 
3,597,238 
 
 
 
 
11,962 
 
(304)
 
3,608,896 
 
 
Issuance of successor equity
 
 
 
414 
1,017,264 
 
 
 
 
 
1,017,678 
 
 
 
Balance at Nov. 30, 2009
 
 
 
414 
1,017,264 
 
 
 
1,621 
 
1,019,299 
 
 
 
Net income (loss)
 
 
 
 
 
(37,892)
 
 
(25)
 
(37,917)
 
(37,917)
 
Other comprehensive income (loss)
 
 
 
 
 
 
(3,334)
 
 
 
(3,334)
 
(3,334)
 
Distributions
 
 
 
 
 
 
 
 
(25)
 
(25)
 
 
 
Share-based compensation expense
 
 
 
 
234 
 
 
 
 
 
234 
 
 
 
Balance at Dec. 31, 2009
 
 
 
414 
1,017,498 
(37,892)
(3,334)
 
1,571 
 
978,257 
 
 
 
Net income (loss)
 
 
 
 
 
(132,297)
 
 
225 
 
(132,072)
 
(132,072)
 
Other comprehensive income (loss)
 
 
 
 
 
 
4,449 
 
 
 
4,449 
 
4,449 
 
Distributions
 
 
 
 
 
 
 
 
(277)
 
(277)
 
 
 
Share-based compensation expense
 
 
 
 
6,230 
 
 
 
 
 
6,230 
 
 
 
Issuance of common stock under compensation plans
 
 
 
(1)
 
 
 
 
 
 
 
 
 
Deconsolidation of White Cliffs
 
 
 
 
 
 
 
 
(1,371)
 
(1,371)
 
 
 
Other
 
 
 
 
 
 
 
 
(148)
 
(148)
 
 
 
Balance at Dec. 31, 2010
 
 
 
415 
1,023,727 
(170,189)
1,115 
 
 
 
855,068 
 
855,068 
 
Balance at Sep. 30, 2010
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
(4,927)
 
Balance at Dec. 31, 2010
 
 
 
 
 
 
 
 
 
 
 
 
855,068 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
32 
 
Balance at Mar. 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2010
 
 
 
415 
1,023,727 
(170,189)
1,115 
 
 
 
855,068 
 
855,068 
 
Net income (loss)
 
 
 
 
 
2,377 
 
 
435 
 
2,812 
 
2,812 
 
Other comprehensive income (loss)
 
 
 
 
 
 
(14,990)
 
 
 
(14,990)
 
(14,990)
 
Issuance of successor equity
127,134 
127,134 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
 
 
8,641 
 
 
 
 
 
8,641 
 
 
 
Issuance of common stock under compensation plans
 
 
 
(3)
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2011
 
 
 
418 
1,032,365 
(167,812)
(13,875)
 
127,569 
 
978,665 
 
978,665 
 
Balance at Sep. 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
740 
 
Issuance of successor equity
127,134 
127,134 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
$ 978,665 
 
Consolidated Statements Of Cash Flows (USD $)
1 Months Ended 12 Months Ended 11 Months Ended
Dec. 31, 2009
Successor [Member]
Dec. 31, 2011
Successor [Member]
Dec. 31, 2010
Successor [Member]
Nov. 30, 2009
Predecessor [Member]
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$ (37,917,000)
$ 2,812,000 
$ (132,072,000)
$ 3,394,079,000 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
Net unrealized (gain) loss related to derivative instruments
7,113,000 
(14,114,000)
(13,339,000)
24,118,000 
Depreciation and amortization
8,792,000 
51,189,000 
70,882,000 
45,022,000 
Loss on disposal or impairment of long-lived assets, net
23,119,000 
9,497,000 
105,050,000 
13,493,000 
Amortization and write down of debt issuance costs
1,028,000 
30,338,000 
23,601,000 
1,618,000 
Non-cash reorganization items
 
 
 
(4,266,588,000)
Deferred tax benefit
(5,692,000)
(9,847,000)
(13,719,000)
(1,350,000)
Non-cash compensation expense
234,000 
8,641,000 
6,230,000 
 
Provision for uncollectible accounts receivable, net of recoveries
 
(7,421,000)
10,613,000 
16,648,000 
Currency (gain) loss
(68,000)
(3,450,000)
2,901,000 
(6,445,000)
Changes in operating assets and liabilities (Note 24)
198,000 
6,396,000 
62,420,000 
229,953,000 
Net cash provided by (used in) operating activities
(3,193,000)
74,041,000 
122,567,000 
(549,452,000)
Cash flows from investing activities:
 
 
 
 
Capital expenditures
(7,700,000)
(65,995,000)
(48,468,000)
(90,382,000)
Proceeds from sale of long-lived assets
 
1,125,000 
24,497,000 
75,486,000 
Investments in non-consolidated subsidiaries
 
(3,717,000)
(867,000)
 
Proceeds from sale of non-consolidated affiliate
 
 
140,765,000 
3,901,000 
Proceeds from the sale of SemStream assets
 
93,054,000 
 
 
Distributions from White Cliffs in excess of equity in earnings
 
12,455,000 
3,819,000 
 
Reconsolidation (deconsolidation) of subsidiaries (Note 5)
 
 
(5,519,000)
17,541,000 
Proceeds from surrender of life insurance
 
 
7,016,000 
 
Other
(268,000)
 
 
(1,529,000)
Net cash provided by (used in) investing activities
(7,968,000)
36,922,000 
121,243,000 
5,017,000 
Cash flows from financing activities:
 
 
 
 
Debt issuance costs
 
(12,533,000)
(1,958,000)
(6,228,000)
Borrowings on debt and other obligations
 
263,905,000 
159,213,000 
114,529,000 
Principal payments on debt and other obligations
(13,953,000)
(503,189,000)
(348,734,000)
(101,876,000)
Net proceeds from sale of limited partner interests in Rose Rock Midstream, L.P.
 
127,134,000 
 
 
Distributions
(25,000)
 
(277,000)
(86,000)
Net cash provided by (used in) financing activities
(13,978,000)
(124,683,000)
(191,756,000)
6,339,000 
Effect of exchange rate changes on cash and cash equivalents
(642,000)
(34,000)
(3,812,000)
444,000 
Net increase (decrease) in cash and cash equivalents
(25,781,000)
(13,754,000)
48,242,000 
(537,652,000)
Cash and cash equivalents at beginning of period
67,698,000 
90,159,000 
41,917,000 
605,350,000 
Cash and cash equivalents at end of period
$ 41,917,000 
$ 76,405,000 
$ 90,159,000 
$ 67,698,000 
Overview
Overview
1. OVERVIEW

SemGroup Corporation is a Delaware corporation headquartered in Tulsa, Oklahoma that provides diversified services for end-users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. SemGroup Corporation began operations on November 30, 2009, as the successor entity of SemGroup, L.P., which was an Oklahoma limited partnership.

On July 22, 2008 (the "Petition Date"), SemGroup, L.P. and certain subsidiaries filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Also on July 22, 2008, SemGroup, L.P.'s Canadian subsidiaries filed applications for creditor protection in Canada under the Companies' Creditors Arrangement Act (the "CCAA"). Later during 2008, certain other U.S. subsidiaries filed petitions for reorganization. While in bankruptcy, SemGroup, L.P. filed a Plan of Reorganization with the court, which was confirmed on October 28, 2009. The Plan of Reorganization determined, among other things, how pre-Petition Date obligations would be settled, the equity structure of the reorganized company upon emergence, and the financing arrangements upon emergence. SemGroup Corporation emerged from bankruptcy on November 30, 2009 (the "Emergence Date").

The accompanying consolidated financial statements include the activities of SemGroup Corporation (the "Successor") from November 30, 2009 through December 31, 2011, and the activities of SemGroup, L.P. (the "Predecessor") from January 1, 2009 through November 30, 2009. The terms "we," "our," "us," "the Company" and similar language used in these notes to consolidated financial statements refer to SemGroup Corporation, SemGroup, L.P. and their subsidiaries. As described in Note 3, we applied fresh-start reporting on the Emergence Date. As a result, the financial statements of the Successor are not comparable to the financial statements of the Predecessor.

Our reportable segments include the following:

 

   

We previously referred to our crude business as SemCrude, but following the contribution of SemCrude, L.P. to Rose Rock, we have decided to refer to this reportable business as "Crude". Crude conducts crude oil transportation, storage, terminalling, gathering, blending, and marketing operations in the United States. Crude's assets include

 

   

a 2% general partner interest and a 57.0% limited partner interest in Rose Rock Midstream, L.P. ("Rose Rock"), which owns an approximate 640-mile crude oil pipeline network in Kansas and Oklahoma, a crude oil gathering, storage and marketing business in the Bakken Shale in North Dakota and Montana and a crude oil storage facility in Cushing, Oklahoma with a capacity of 5.0 million barrels; and

 

   

a 51% ownership interest in White Cliffs Pipeline, L.L.C., ("White Cliffs") which owns a 527-mile pipeline that transports crude oil from Platteville, Colorado to Cushing, Oklahoma ("White Cliffs Pipeline").

 

   

SemStream, which owns 8,932,031 common units representing 32.2% of the total limited partner interests, as of December 31, 2011, in NGL Energy Partners LP ("NGL Energy"), which markets, transports and stores natural gas liquids in the United States, and a 7.5% interest in the general partner of NGL Energy. SemStream also owns and operates a residential propane supply business in Page and Payson, Arizona.

 

 

   

SemGas, which provides natural gas gathering and processing services in the United States. SemGas owns and operates over 800 miles of gathering pipelines in Kansas, Oklahoma, and Texas and three processing plants in Oklahoma and Texas.

 

   

SemLogistics, which provides refined product and crude oil storage services in the United Kingdom. SemLogistics owns a facility in Wales that has a storage capacity of approximately 8.7 million barrels.

 

   

SemMexico, which purchases, produces, stores, and distributes liquid asphalt cement products in Mexico. SemMexico operates twelve manufacturing plants and two emulsion distribution terminals.

We previously had a seventh segment, SemCanada Crude, which aggregated and blended crude oil in Western Canada. Due to adverse market conditions impacting this segment, we sold the property, plant and equipment of SemCanada Crude in late 2010 and began winding down its operations (Note 6).

We disposed of numerous assets while in bankruptcy, including (Notes 6 and 7):

 

   

SemFuel, a refined products marketing and storage business in the United States;

 

   

SemMaterials, an asphalt processing, storage, and marketing business in the United States;

 

   

SemEuro Supply, a refined products marketing business in Europe;

 

   

SemCanada Energy, a natural gas marketing business in Canada;

 

   

SemGroup Energy Partners, L.P. ("SemGroup Energy Partners" or "SGLP"), a crude oil and asphalt storage business in the United States (currently known as Blueknight Energy Partners, L.P.); and

 

   

certain other businesses, none of which were significant to these consolidated financial statements.

Consolidation And Basis Of Presentation
Consolidation And Basis Of Presentation
2. CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Consolidated subsidiaries

Our consolidated financial statements include the accounts of our controlled subsidiaries, including Rose Rock Midstream, L.P. All significant transactions between our consolidated subsidiaries have been eliminated. Outside ownership interests in consolidated subsidiaries are reported as non-controlling interests in the consolidated financial statements.

Proportionally consolidated assets

Our SemCAMS segment owns undivided interests in certain natural gas gathering and processing assets, for which we record only our proportionate share of the assets on the consolidated balance sheets. The net book value of the property, plant and equipment recorded by us associated with these undivided interests is approximately $167.4 million at December 31, 2011. We serve as operator of these facilities and incur the costs of operating the facilities (recorded as operating expenses in the consolidated statements of operations) and charge the other owners for their proportionate share of the costs (recorded as other revenue in the consolidated statements of operations).

Equity method investments

At the end of September 2010, we sold a portion of our ownership interests in White Cliffs to two unaffiliated parties, which reduced our ownership interest in White Cliffs from approximately 99% to 51%. Upon closing of this sale, the other owners received substantive rights to participate in the management of White Cliffs. Because of this, we deconsolidated White Cliffs at the end of September 2010, and began accounting for it under the equity method.

On November 1, 2011, we contributed the long-lived assets and certain working capital of our SemStream segment to NGL Energy in return for limited partner interests in NGL Energy, an interest in the general partner of NGL Energy, and cash for working capital. We hold two seats on the board of directors of the general partner of NGL Energy, and we account for our investment in NGL Energy and its general partner under the equity method.

Cost method investments

We lost control of several of our subsidiaries as a direct or indirect result of the bankruptcy petitions, including all Canadian subsidiaries, SemGroup Holdings, L.P. (which held our ownership interests in SemGroup Energy Partners), and Wyckoff Gas Storage Company, L.L.C. These subsidiaries were de-consolidated during 2008 and subsequently accounted for as cost method investments. We regained control of SemCAMS and SemCanada Crude on the Emergence Date, and consolidated these subsidiaries again beginning on that date.

Discontinued operations

As part of the process of reorganizing to emerge from bankruptcy, we disposed of certain of our operations. As described in Note 7, SemFuel, SemMaterials, and SemEuro Supply met the criteria to be classified as discontinued operations in the consolidated financial statements.

Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies
Rose Rock Midstream, L.P.
Rose Rock Midstream, L.P.
4. ROSE ROCK MIDSTREAM, L.P.

On December 14, 2011, our subsidiary Rose Rock Midstream, L.P. completed an initial public offering in which it sold 7,000,000 common units representing limited partner interests. We received proceeds of $127.1 million from this offering, net of underwriter discounts and other fees associated with the offering. We used these proceeds to make principal payments on long-term debt.

Subsequent to the initial public offering, we own 59% of the partnership consisting of 57% limited partner interests that include 1,389,709 common units and 8,389,709 subordinated units and the entire 2% general partner interest (342,437 units) of Rose Rock. We also own certain incentive distribution rights, which are described below. We control the operations of Rose Rock through our ownership of the general partner interest, and we continue to consolidate Rose Rock. The outside ownership interests in Rose Rock are reflected in "non-controlling interests in consolidated subsidiaries" on our consolidated balance sheet at December 31, 2011. The portion of the net income of Rose Rock subsequent to the initial public offering that is attributable to outside owners is reflected within "net income attributable to non-controlling interests" in our consolidated statement of operations for the year ended December 31, 2011.

 

Rose Rock intends to pay a minimum quarterly distribution of $0.3625 per unit to the extent it has sufficient available cash, as defined in Rose Rock's partnership agreement. Rose Rock's partnership agreement requires Rose Rock to distribute all of its available cash each quarter in the following manner:

 

   

first, 98.0% to the holders of common units and 2.0% to the general partner, until each common unit has received the minimum quarterly distribution of $0.3625, plus any arrearages from prior quarters;

 

   

second, 98.0% to the holders of subordinated units and 2.0% to the general partner, until each subordinated unit has received the minimum quarterly distribution of $0.3625; and

 

   

third, 98.0% to all unitholders, pro rata, and 2.0% to the general partner, until each unit has received a distribution of $0.416875If cash distributions to the unitholders exceed $0.416875 per unit in any quarter, the general partner will receive, in addition to distributions on its 2.0% general partner interest, increasing percentages, up to 48.0%, of the cash Rose Rock distributes in excess of that amount.

On January 23, 2012, Rose Rock declared a distribution of $0.0670 per unit. This distribution is the first declared by Rose Rock and the prorated amount corresponds to its minimum quarterly cash distribution of $0.3625 per unit, or $1.45 per unit on an annualized basis. The proration period began immediately after the closing of Rose Rock Midstream's initial public offering, December 14, 2011, and continued through December 31, 2011. The distribution was paid on February 13, 2012 to all unitholders of record on February 3, 2012. Of this distribution, $0.7 million was paid to us and $0.5 million was paid to outside owners.

Certain summarized balance sheet information of Rose Rock as of December 31, 2011 is shown below (in thousands):

 

Cash

   $ 9,709   

Other current assets

     156,873   

Property, plant and equipment

     276,246   

Other noncurrent assets

     2,666   
  

 

 

 

Total assets

   $ 445,494   
  

 

 

 

Current liabilities

   $ 140,553   

Long-term debt

     87   

Partners' capital attributable to SemGroup

     177,323   

Partners' capital attributable to noncontrolling interests

     127,531   
  

 

 

 

Total liabilities and partners' capital

   $ 445,494   
  

 

 

Investments In Non-Consolidated Subsidiaries
Investments In Non-Consolidated Subsidiaries
5. INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES

White Cliffs

Until the end of September 2010, we owned 99.17% of White Cliffs, and the remaining interests were held by two unaffiliated parties. During 2010, both of these parties exercised their rights under an agreement to purchase additional ownership interests in White Cliffs. Subsequent to the closing of these transactions, we own 51% of White Cliffs. After purchasing these ownership interests, the other owners have substantive rights to participate in the management of White Cliffs; because of this, we deconsolidated White Cliffs at the end of September 2010, and began accounting for it under the equity method.

 

Certain summarized balance sheet information of White Cliffs is shown below (in thousands):

 

     December 31,
2011
     (unaudited)
December 31,
2010
 

Current assets

   $ 11,653       $ 9,797   

Property, plant and equipment, net

     222,473         234,300   

Goodwill

     17,000         17,000   

Other intangible assets, net

     33,073         40,848   
  

 

 

    

 

 

 

Total assets

   $ 284,199       $ 301,945   
  

 

 

    

 

 

 

Current liabilities

   $ 3,259       $ 3,824   

Members' equity

     280,940         298,121   
  

 

 

    

 

 

 

Total liabilities and members' equity

   $ 284,199       $ 301,945   
  

 

 

    

 

 

 

Under the equity method, we do not report the individual assets and liabilities of White Cliffs on our consolidated balance sheets. Instead, our ownership interest is reflected in one line as a noncurrent asset on our consolidated balance sheets.

Certain summarized income statement information of White Cliffs for the year ended December 31, 2011 and the three months ended December 31, 2010 is shown below (in thousands):

 

     Year Ended
December 31,
2011
     (unaudited)
Three Months Ended
December 31,
2010
 

Revenue

   $ 66,097       $ 13,619   

Operating, general and administrative expenses

     12,746         3,294   

Depreciation and amortization expense

     20,842         5,680   

Net income

     32,509         4,645   

The equity in earnings of White Cliffs for the year ended December 31, 2011 reported in our consolidated statement of operations is less than 51% of the net income of White Cliffs for the same period. This is due to certain general and administrative expenses we incur in managing the operations of White Cliffs that the other owners are not obligated to share. Such expenses are recorded by White Cliffs, and are allocated to our ownership interests. White Cliffs recorded $3.2 million of such general and administrative expense during the year ended December 31, 2011 and $0.9 million during the three months ended December 31, 2010.

Our ownership percentage of White Cliffs is significant as defined by Securities and Exchange Commission's Regulation S-X Rule 1-02(w). Accordingly, as required by Regulation S-X Rule 3-09, we have included the audited financial statements of White Cliffs as of and for the year ended December 31, 2011 and the unaudited financial statements of White Cliffs as of, and for the three months ended December 31, 2010 as an exhibit to this Form 10-K.

NGL Energy

On November 1, 2011, we acquired 8,932,031 common units representing limited partner interests in NGL Energy (which represents approximately 32.2% of the total 27,715,599 limited partner units of NGL Energy outstanding at December 31, 2011) and a 7.5% interest in the general partner of NGL Energy. As part of this transaction, we agreed to waive our distribution rights on certain of the common units for a specified period of time. We recorded our investment in NGL Energy at the acquisition date fair value, estimated to be $184.0 million. We derived our estimate of the fair value of our limited partner interests in NGL Energy using the closing price of limited partner units on October 31, 2011, adjusted to reflect the waiver of certain distribution rights. At December 31, 2011, the aggregate value of our limited partner interests in NGL Energy was approximately $177.0 million, calculated based on the closing price of the limited partner units on December 30, 2011, adjusted to reflect the waiver of distribution rights on approximately 3.9 million units until the third quarter of 2012.

The excess of the recorded amount of our investment over the book value of our share of the underlying net assets primarily represents equity method goodwill.

At December 31, 2011, the value of our 8,932,031 common units in NGL Energy was $184.3 million, based on a December 30, 2011 closing price of $20.63 per common unit. This does not reflect our 7.5% interest in the general partner of NGL Energy and does not include any valuation adjustment related to our agreement to waive our distribution rights on certain of the common units for a specified period of time. Certain unaudited summarized balance sheet information of NGL Energy is shown below (in thousands):

 

     (unaudited)
December 31,
2011
 

Current assets

   $ 332,144   

Property plant and equipment, net

     227,893   

Goodwill

     92,930   

Intangible and other assets, net

     102,238   
  

 

 

 

Total assets

   $ 755,205   
  

 

 

 

Current liabilities

   $ 269,073   

Long-term debt

     117,590   

Other noncurrent liabilities

     222   

Partners' equity

     368,320   
  

 

 

 

Total liabilities and partners' equity

   $ 755,205   
  

 

 

 

Our policy is to record our equity in earnings of NGL Energy on a one-quarter lag, as we do not expect information on the earnings of NGL Energy to always be available in time to consistently record the earnings in the quarter in which they are generated. Accordingly, we have not recorded any equity in earnings of NGL Energy for the period from November 1, 2011 to December 31, 2011 in our consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2011. Certain unaudited summarized income statement information of NGL Energy for the nine months ended December 31, 2011 is shown below (in thousands):

 

     (unaudited)
Nine Months
Ended
December 31,
2011
 

Revenue

   $ 871,544   

Operating, general and administrative expenses

     869,143   

Depreciation and amortization expense

     8,480   

Net loss

     (6,079

 

Canadian subsidiaries

On the Petition Date, our Canadian subsidiaries, which included SemCanada Crude, SemCAMS, and SemCanada Energy (collectively, the "Canadian Subsidiaries"), filed applications for creditor protection under the CCAA in Canada. Since the CCAA proceedings were administered in a different jurisdiction than that of our petition for relief under Chapter 11 of the United States Bankruptcy Code, we ceased to control the Canadian Subsidiaries, and accordingly we deconsolidated them on July 22, 2008. We regained control of SemCAMS and SemCanada Crude on the Emergence Date, and consolidated them again on that date.

SemGroup Energy Partners

Near the Petition Date, we lost control of SemGroup Energy Partners when certain creditors exercised their right to designate the members of the board of directors of its general partner. Also during 2008, SemGroup Holdings, L.P. ("SemGroup Holdings"), a wholly-owned subsidiary that held our ownership interests in SemGroup Energy Partners, filed for bankruptcy protection. SemGroup Holdings' bankruptcy case was administered separately from our bankruptcy case, and therefore we deconsolidated SemGroup Holdings and SemGroup Energy Partners. During 2009, creditors seized all of our ownership interests in SemGroup Energy Partners. SemGroup Holdings has not emerged from bankruptcy.

Disposals And Impairments Of Long-Lived Assets
Disposals And Impairments Of Long-Lived Assets
Discontinued Operations
Discontinued Operations
7. DISCONTINUED OPERATIONS

SemFuel, SemMaterials, and SemEuro Supply are classified as discontinued operations in the consolidated statements of operations. During 2008, we decided to sell the assets of SemMaterials and to cease the operations of SemEuro Supply, due to their losses from operations and high working capital requirements. During 2009, we decided to sell the assets of SemFuel, due to its high working capital requirements. By December 31, 2009, the majority of the assets of SemMaterials and SemFuel had been sold.

Certain summarized information on the results of discontinued operations is shown below (in thousands):

 

     Successor            Predecessor  
     Year Ended
December 31,
2011
    Year Ended
December 31,
2010
     Month Ended
December 31,
2009
           Eleven Months
Ended
November 30,
2009
 

External revenue

   $ —        $ —         $ 2,335            $ 114,591   
  

 

 

   

 

 

    

 

 

         

 

 

 

Gain on disposal of long-lived assets, net

   $ —        $ —         $ —              $ 16,846   
  

 

 

   

 

 

    

 

 

         

 

 

 

Income (loss) from discontinued operations before income taxes

   $ (8   $ 2,668       $ 215            $ (141,586

Income tax expense

     2        234         —                27   
  

 

 

   

 

 

    

 

 

         

 

 

 

Income (loss) from discontinued operations, net of income taxes

   $ (10   $ 2,434       $ 215            $ (141,613
  

 

 

   

 

 

    

 

 

         

 

 

 

Gains (losses) on disposal of long-lived assets classified as discontinued operations included the following for the eleven months ended November 30, 2009 (in thousands):

 

Reorganization
Reorganization
8. REORGANIZATION

On July 22, 2008, we, and many of our subsidiaries, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code and applications for creditor protection under the CCAA in Canada. On October 22, 2008, two more of our subsidiaries filed petitions for protection under the U.S. Bankruptcy Code. During the reorganization process, certain claims against us in existence prior to the filing of the petitions for relief under the federal bankruptcy laws were stayed while we continued business operations as a debtor-in-possession. We received approval from the court to pay or otherwise honor certain of our obligations incurred before the Petition Date. The court also approved our use of cash on hand at the Petition Date and cash subsequently generated through business operations to meet our post Petition Date obligations. The court also authorized us to obtain debtor-in-possession financing.

While in bankruptcy, we filed a Plan of Reorganization with the court, which was confirmed on October 28, 2009. The Plan of Reorganization determined, among other things, how pre-Petition Date obligations would be settled, our equity structure upon emergence, and our financing arrangements upon emergence.

Determination of reorganization value

An essential element in negotiating a reorganization plan with the various classes of creditors is the determination of reorganization value by the parties in interest. In the event that the parties in interest cannot agree on the reorganization value, the court may be called upon to determine the reorganization value of the entity before a plan of reorganization can be confirmed.

During the reorganization process, a reorganization value was proposed. This reorganization value was ultimately agreed to by the creditors and confirmed by the court. The proposed reorganization value was determined by applying the following valuation methods:

 

   

a "guideline company" approach, in which valuation multiples observed from industry participants were considered and comparisons were made between our expected performance relative to other industry participants to determine appropriate multiples to apply our financial metrics;

 

   

analysis of recent transactions involving companies determined to be similar to us; and

 

   

a calculation of the present value of our estimated future cash flows.

After completing this analysis, the reorganization value was determined to be $1.5 billion. This proposed reorganization value was determined using numerous projections and assumptions. These estimates are subject to significant uncertainties, many of which are beyond our control, including, but not limited to, the following:

 

   

changes in the economic environment;

 

   

changes in supply or demand for petroleum products;

 

   

changes in prices of petroleum products;

 

   

our ability to successfully implement expansion projects;

 

   

our ability to improve relationships with customers and suppliers, as these relationships were adversely impacted by the bankruptcy filing;

 

   

our ability to renew certain business operations that were limited during the bankruptcy due to limitations on access to capital; and

 

   

our ability to manage the additional costs associated with being a public company.

 

The use of different estimates could have resulted in a materially different proposed reorganization value, and there can be no assurance that actual results will be consistent with the estimates that were used to determine the proposed reorganization value. The reorganization value confirmed by the court was utilized in the application of fresh-start reporting.

Valuation of assets and liabilities

We recorded individual assets and liabilities based on their fair values at the Emergence Date and adjusted deferred tax liabilities where appropriate to reflect the change in the financial reporting basis of assets. We recorded approximately $188.8 million of goodwill, which represented the excess of the reorganization value over the fair value of the identifiable assets.

 

November 30, 2009 balance sheet

The following table shows the effects of our emergence from bankruptcy on the November 30, 2009 consolidated balance sheet (in thousands):

 

SemGroup, L.P.
(Predecessor)
    Reconsolidation
of SemCAMS
and
SemCanada
Crude(a)
    Reorganization
Adjustments
    Fresh Start
Adjustments
    SemGroup
Corporation
(Successor)
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

  $ 793,126      $ 132,813      $ (858,241     (b   $ —          $ 67,698   

Restricted cash

    15,082        15,692        182,818        (c     —            213,592   

Accounts receivable

    79,392        139,712        (230       —            218,874   

Receivable from affiliates

    86,560        (84,842     (1,718     (d     —            —     

Inventories

    121,958        12,569        —            36,521        (p     171,048   

Current assets of discontinued operations

    10,593        —          —            —            10,593   

Other current assets

    49,487        93,732        —            1,785        (p     145,004   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    1,156,198        309,676        (677,371       38,306          826,809   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Property, plant and equipment

    707,628        202,879        —            150,588        (p     1,061,095   

Goodwill

    46,729        52,787        —            89,296        (p     188,812   

Other intangible assets

    14,081        42,100        —            78,271        (p     134,452   

Investments in non-consolidated subsidiaries

    102,598        (29,098     (73,500     (e     —            —     

Note receivable from affiliate

    139,109        (139,109     —            —            —     

Other assets, net

    8,574        767        46,057        (f     5,946        (p     61,344   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 2,174,917      $ 440,002      $ (704,814     $ 362,407        $ 2,272,512   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

LIABILITIES AND OWNERS' EQUITY (DEFICIT)

             

Current liabilities:

             

Accounts payable

  $ 101,295      $ 93,374      $ (21,102     (g   $ —          $ 173,567   

Accrued liabilities

    93,188        17,143        (77,938     (h     (267       32,126   

Payables to pre-petition creditors

    —          8,221        302,212        (h     —            310,433   

Other current liabilities

    25,239        454        —            4,909        (p     30,602   

Current liabilities of discontinued operations

    3,663        —          10,559        (i     —            14,222   

Current portion of long-term debt

    197,727        —          (176,734     (j     —            20,993   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    421,112        119,192        36,997          4,642          581,943   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities subject to compromise

    4,707,994        —          (4,707,994     (m     —            —     

Long-term debt

    90        —          514,001        (j     267          514,358   

Deferred income taxes

    36,802        64,096        —            4,845        (q     105,743   

Other noncurrent liabilities

    2,276        32,856        16,037        (k     —            51,169   

Investment in SemGroup Holdings

    613,918        —          (613,918     (l     —            —     

Predecessor Equity

             

SemGroup, L.P. partners' capital (deficit):

             

Partners' capital (deficit)

    (3,597,238     223,858        3,373,380        (n     —            —     

Accumulated other comprehensive income (loss)

    (11,962     —          —            11,962        (r     —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total SemGroup, L.P. partners' capital (deficit)

    (3,609,200     223,858        3,373,380          11,962          —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Successor Equity

             

SemGroup Corporation:

             

Common stock

    —          —          414        (o     —            414   

Additional paid in capital

    —          —          676,269        (o     340,995        (r     1,017,264   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total SemGroup Corporation equity

    —          —          676,683          340,995          1,017,678   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Noncontrolling interests in consolidated subsidiaries

    1,925        —          —            (304     (r     1,621   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total owners' equity (deficit)

    (3,607,275     223,858        4,050,063          352,653          1,019,299   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and owners' equity (deficit)

  $ 2,174,917      $ 440,002      $ (704,814     $ 362,407        $ 2,272,512   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

 

 

The following table reconciles the reorganization value to the November 30, 2009 equity of the reorganized SemGroup Corporation (in thousands). The November 30, 2009 equity balances of the reorganized SemGroup Corporation include the shares required to be issued in settlement of pre-petition claims as the process of resolving these claims progresses.

 

Reorganization value

   $ 1,500,000   

less: SemGroup term loan

     (300,000

less: SemCrude Pipeline credit facility

     (125,000

less: SemLogistics credit facility

     (41,285

less: warrants (Note 19)

     (16,037
  

 

 

 

SemGroup Corporation equity

   $ 1,017,678   
  

 

 

 

The reorganization items gain of the Predecessor shown in the consolidated statement of operations consists of the following for the eleven months ended November 30, 2009 (in thousands):

 

Gain on extinguishment of debt (a)

   $ 2,544,218   

Gain on disposal of SemGroup Energy Partners (b)

     613,918   

Gain on asset revaluation in fresh-start reporting (c)

     352,653   

Gain from Canadian plan effects and reconsolidation (d)

     244,281   

Professional fees (e)

     (164,964

Uncollectable accounts expense (f)

     (38,757

Loss on settlement with SemGroup Energy Partners (g)

     (11,677

Employment costs (h)

     (6,706

Other

     (523
  

 

 

 

Reorganization items gain

   $ 3,532,443   
  

 

 

 

 

  (e) Professional fees include a variety of services related to the restructuring of the business, including, among others:
 

legal fees related to the reorganization process, including those related to bankruptcy court filings and hearings, negotiation of credit agreements, settlements of disputes with claimants, and other matters;

 

 

general management consulting services relating to the disposal of assets, the reconciliation and negotiation of pre-petition claims, preparation for emergence from bankruptcy, and other matters;

 

 

valuation advisory fees for the determination of the reorganization value of the business required for the Plan of Reorganization and the valuation of long-lived assets required by fresh-start reporting;

 

 

accounting fees for assistance with fresh-start reporting and preparation for public company financial reporting obligations; and

 

 

fees paid to the United States Trustee.

 

Condensed Combined Financial Statements Of U.S. Debtors
Condensed Combined Financial Statements Of U.S. Debtors
9. CONDENSED COMBINED FINANCIAL STATEMENTS OF U.S. DEBTORS

The condensed combined financial statements shown below include SemGroup, L.P. and its subsidiaries that filed for bankruptcy in the United States (the "U.S. Debtors"). Transactions and balances between the U.S. Debtors have been eliminated in the condensed combined financial statements below. The condensed combined financial statements below are presented on the same basis as our consolidated financial statements, except as described below.

Condensed combined statement of operations of U.S. Debtors for the eleven months ended November 30, 2009 (in thousands):

 

Condensed combined statement of cash flows of U.S. Debtors for the eleven months ended November 30, 2009 (in thousands):

 

Net cash provided by (used in):

  

Operating activities

   $ (610,832

Investing activities

     28,284   

Financing activities

     14,655   
  

 

 

 

Net decrease in cash and cash equivalents

     (567,893

Cash and cash equivalents, beginning of period

     590,250   
  

 

 

 

Cash and cash equivalents, end of period

   $ 22,357   
  

 

 

Segments
Segments
10. SEGMENTS

As described in Note 1, our businesses are organized based on the nature and location of the services they provide. Certain summarized information related to our reportable segments is shown in the tables below. None of the operating segments have been aggregated, other than White Cliffs Pipeline, which has been included within the Crude segment. Although "corporate and other" does not represent an operating segment, it is included in the tables below to reconcile segment information to that of the consolidated Company. We sold the property, plant and equipment of SemCanada Crude during fourth quarter 2010 and began winding down its operations. SemCanada Crude ceased to be an operating segment during fourth quarter 2010, and is therefore included within "Corporate and other" in the tables below. Eliminations of transactions between segments are also included within "Corporate and other" in the tables below.

The accounting policies of each segment are the same as the accounting policies of the consolidated Company. Transactions between segments are generally recorded based on prices negotiated between the segments. Certain general and administrative and interest expenses incurred at the corporate level were allocated to the segments, based on our allocation policies in effect at the time. During 2010, we completed a detailed study of these expenses and developed a more refined allocation methodology, which we applied to the general and administrative and interest expense allocations for the years ended December 31, 2010 and 2011.